Religious Schools, What kind of coverage do they need?

There are many factors to consider when choosing insurance coverage for your school.

Education facilities are becoming increasingly high risk. They are generally empty after school hours, on weekends and during school holidays. Schools are prime targets for arson, theft, and vandalism. During school hours, religious schools educate thousands of children each day, and where children are involved, accidents will happen. Employees also suffer from injuries or work related illnesses. Also, state legislation requires workers to be protected by Workers Compensation Insurance.

Religious schools have a responsibility to:

  • Educate students
  • Provide a safe environment for employees and students
  • Provide appropriate educational facilities and reference materials

Each of these responsibilities may invite potential losses or liabilities and therefore require insurance coverage. What insurance coverage does your school need?

Church Insurance coverage for schools fall broadly into three classes: Property, Liability, and Other Benefits.

Property coverage

Basic property coverage applies to physical loss or damage to the school buildings and contents. It can also cover other insured property as a result of fire, explosion, natural disasters, theft, vandalism, or accidental damage. Natural disasters covered can include storms, wind, water, flood, lightning, and earthquakes. Property coverage can also be extended to cover loss of revenue and additional costs to keep the school operating, loss by employee dishonesty, property in transit, machinery breakdown, and electronic equipment.

Other property coverage:

Electronic equipment – This type of insurance covers repair or replacement costs to electronic equipment due to electronic, electrical, or mechanical breakdown. The coverage can extend to insure costs of reconstructing damaged data media and the increased costs of using substitute equipment in order to maintain school business operations.

Employee dishonesty – This type of insurance can provide coverage for the school’s money, negotiable instruments, goods, or other property against theft, embezzlement, or misappropriation by employees.

Major property exposures – Libraries (water and smoke damage), science blocks (explosion), computer rooms (theft), buildings (malicious damage and vandalism), air conditioning (breakdown), and construction ( storm).

Liability coverage:

Directors’ and officers’ insurance – This coverage protects directors or officers from claims made against them of a wrongful act committed or alleged to have been committed in their capacity as a director or officer of the school. A wrongful act is defined as “any actual or alleged breach of duty, breach of trust, neglect, error, misstatement, misleading statement, omission, breach of warranty of authority, or other act done or wrongly attempted by any director or officer.

Actions may be brought against directors and officers by employees, students and/or parents, competitors, shareholders, creditors, members of the public, etc.

Employment practices liability insurance – This coverage protects the school as well as past and present directors and officers, and all employees.

The policy covers the following:

  • Wrongful refusal to employ an applicant for employment.
  • Wrongful failure to promote an employee.
  • Wrongful demotion, negligent reassignment, or disciplinary action.
  • Wrongful termination of employment, including constructive dismissal.
  • Sexual harassment.
  • Unlawful discrimination which may include discrimination on the grounds of race, color, sex, sexual preference, age, physical or mental disability, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction, or social origin.
  • Oral or written publication of material that slanders, defames, or libels an employee or violates or invades an employee’s right of privacy.

The term wrongful in this context is defined as unfair or unlawful.

Worker’s compensation insurance – This class of insurance pays compensation to employees for injuries received during working hours while in the school’s employ, or for work-caused illnesses, such as stress.

Professional indemnity insurance – This policy provides indemnity for claims arising from the rendering of or from failure to render professional advice or service by the school (the definition of insured includes teachers) or any error or omission connected with such advice or service. This type of policy can include: breach of professional duty, libel and slander, loss of documents, fraud, and dishonesty, automatic reinstatement.

Sexual abuse/molestation coverage:

Many churches and social service providers with primary care responsibilities for minors who have become defendants in sexual molestation claims have implemented risk management practices and loss control procedures. These include the screening of all workers, physical plant changes, written policies for interactions with children, and mechanisms for investigating and responding to claims.

Although these improvements have resulted in a downturn in reported incidents, the litigation continues to produce higher expenses, settlements, and jury verdicts. Along with the surge in claim activity and litigation, the need for insurance coverage has risen drastically.

While some of this coverage is on a per occurrence basis, most of the sexual abuse/molestation policies are written on a claims-made basis. The policies tend to have specific provisions addressing the number and the timing of claims.

Most sexual misconduct policies provide coverage only to non-perpetrators, although some do provide a defense (but not indemnity) to those accused of sexual misconduct unless and until convicted.

Sexual misconduct coverage can be included within the policy’s general liability or professional liability coverage insuring agreements or it can be excluded there and added separately as an endorsement.

A typical sexual misconduct coverage insuring agreement provides:

“We will pay those sums that the insured becomes legally obligated to pay as damages because of injury arising out of an act of ‘sexual misconduct’ to which this insurance applies.”

Another form of sexual misconduct coverage agrees to:

“Pay those sums the insured becomes legally obligated to pay because of “bodily injury” arising out of:

(1) The actual or threatened sexual abuse, molestation or harassment of any person by, or with the consent or acquiescence of, any insured, any employee of the insured, or any person for whose acts the insured may be held legally liable; or

(2) The negligent:

(a) Employment;

(b) Investigation;

(c) Supervision;

(d) Reporting to the proper authorities or failure to report; or

(e) Retention

Of any insured, an employee of the insured, or any other person for whose acts the insured may be held liable for the actual or threatened sexual abuse, molestation or harassment of any person.

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